Infernal Ramblings
A Malaysian Perspective on Politics, Society and Economics

Communism vs Capitalism

Written by johnleemk on 12:11:08 pm Jun 10, 2005.
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One major issue I have with communism that I feel is often overlooked by people debating the subject is that a communist system rewards you based on how much work is done and not how much is produced. This fundamental precept is why, for example, communists think investors are thieves who should be torn from limb to limb while capitalists praise them to high heavens.

The only problem with this is that communists have overlooked a gaping hole in their theory: is valueless work still valuable? For example, people could dig holes in the earth for no particular reason; would that merit them receiving paychecks? Naturally not. Yet, somehow, communists find something wrong with things when due to a slight correction in the share markets, a speculator makes millions due to foresight and planning.

However, communists also tend to blame their vehement hatred of white-collar bourgeouisie on the fact that these leeches are taking the money of the proletariat. To back this up, they show, for example, how a short-seller profits from the bankruptcy of, say, an automobile manufacturer. The assembly line workers end up on the dole while the investor (or swindler, as some would have it) walks away with a few million in his pocket.

Yet, what is wrong with this? If the short-seller did not short-sell the company, it would still have collapsed, wouldn't it? After all, sale or no sale, corporate fortunes are independent of the market's operations, aren't they? Seems the capitalists got this one wrong too.

You see, share markets operate on a herd mentality. Sure, there are a few contrarian investors once in a while, but it's usually because they're following another investor's lead. Independent investors are a rare breed in modern stock markets. Therefore, all it takes is Warren Buffett or another highly-esteemed investor to short-sell a stock for the stock price to go into freefall, taking the company down with it.

So, does the pro-communist camp have a point? Well, I think we can all agree there are a lot of corporate swindlers out there. But can we really blame things on one short-seller? Again, the two camps naturally differ. One argues that the answer is yes; the short-seller sold the company short because he knew others would follow his lead, bringing the company down, thereby allowing him to profit. Others suggest that instead, the short-seller was insightful in noticing the company would go down, and decided to make a bit of money off its unstoppable demise.

Who is correct? I feel it's now becoming dreadfully clear that both sides have a point; on one hand, there's certainly something wrong when one man calling his stockbroker can decide the fate of thousands of people, and this man has no responsibility at all for their fate. On the other, do you expect me to believe we're supposed to pay someone for randomly digging holes (or, euphemistically, expending considerable effort)?

If you've been reading carefully, I think you know where we're headed. The answer is clear: both capitalism and communism are right and wrong. Relying purely on one economic system is foolish and disastrous. Essentially, we cannot depend on either communism or capitalism to fully close the rich-poor divide. What is needed is either something totally out of the box, or an amalgam of the two systems, such as socialism.

Nat's commune is an out of the box idea, but does it have any practical merit? Based on centuries worth of psychological research and observation, the answer is no. The only manner of implementing the commune would be to group all commune supporters in a separate nation state and allow them to work things out for themselves. However, in today's geo-political system, that would make them an international pariah, leading to quick destruction, as it is quite unlikely the fledgling nation could hack it in the rough and tumble world of global markets and diplomacy, where textbook capitalism and communism/socialism is the norm. The only other option would be to force the commune on people, which would entail brainwashing. In line with the tenets of freedom of thought, such an action would be unacceptable.

An amalgam looks more likely. Such a system would allow market forces to operate, but with clearly defined boundaries so as to enforce mechanisms that would prevent mercenary behaviour. At the same time, a basic welfare and healthcare system would be provided to guarantee people the most basic of needs, and nothing more. Naturally, the issue of how to achieve this "perfect" system is a very contentious one. After all, we know the bureaucratic failures when things go wrong; welfare queens in the US, the NHS in Britain, the ridiculous unemployment rate in France, and so on. I cannot afford to spend too much effort on detailing a proposal to solve this conundrum, particularly due to the efforts of Peter Drucker, who has written an excellent book on the topic entitled Post-Capitalist Society. It is available at my municipal library, so it shouldn't be too hard to find if you are in a first-world country.


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Infernal Ramblings is a Malaysian website focusing on current events and sociopolitical issues. Its articles run the gamut from economics to society to education.

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